Pay Off your Credit Card Debt

Credit card debt is a big problem in America today. One recent study found that 1 in 4 people have more credit card debt than savings. Households with credit card debt on average have about $15,000 in debt, and that makes it incredibly hard to make ends meet — let alone pursue dreams for the future.

Do you find yourself in that boat?

If so, don’t despair. The best time to start paying off credit card debt is right now. These tips will help you take control of your debt and start your journey to becoming debt free. These are lessons that I’ve learned through my own personal experience with credit card debt (and from working at ReadyForZero which developed online tools to help people pay off debt). Just remember, paying off debt is not a goal you can achieve immediately — it will take significant time and perseverance.

1. Understand the Risks of Credit Cards

Why are credit cards risky? For a few reasons: first, they make it easier to spend money that you don’t have. Research has shown that we feel more pain when we spend actual dollars than when we swipe a credit card to pay for a purchase. In other words, the credit card actually removes the discomfort of seeing hard-earned money leave your wallet. That’s why it can be so easy to get caught up in credit card debt.

Another potential problem with credit cards is minimum payments — which can keep you in debt for a very long time. Many people simply make those minimum payments while their balance barely shrinks (or perhaps continues to grow!) because of further spending and interest charges.

In fact, the third reason credit cards are risky is the interest. Some cards have  high interest rates — up to 25 or 30 percent! Even if you have a lower interest rate, like 10%, that still means you’re losing money every month when you carry a balance. The interest can accumulate very quickly, which can also keep you in debt for a long time if you’re not careful.

For example, consider the story of a woman named Jennifer who paid off $37,000 in debt, and she said her problem began with a few innocent purchases on a credit card (including a desktop computer). “I pretty much just kept some kind of revolving credit card debt the whole time,” she said. Before she knew it, the debt had spiraled. But thankfully she was able to conquer it after learning some important strategies, including the ones below.

2. Make a Plan of Attack to Pay Off Your Credit Cards

Okay, so now you understand the risks of credit cards. But the question remains: how to pay off credit card debt? To do that, you’ll need a plan. Start by putting all your credit card statements on the table and writing a list of the current balances and interest rates. Make sure you put them in order — from the one with the highest interest rate to the one with the lowest interest rate.

Then craft your battle plan. You want to pay off the highest interest credit card first because that will save you the most money in the long run. So figure out how much you can pay in total (per month) and then load up all that extra money (after minimum payments) and aim it like a bazooka at the high-interest credit card.

Your plan will need to focus on the first card, and once that first debt is destroyed you’ll move onto to the second-highest card, and so on. This way, you’ll save yourself as many interest payments as possible.

Jennifer experienced a big change once she created her get-out-of-debt plan. As soon as she had her monthly goal in mind, she became very motivated and started working hard to make those higher payments every month.

3. Treat Credit Card Debt Like an Emergency

A third important lesson is that you should view credit card debt as an emergency. What this means is doing everything possible to get out of debt faster. A big factor in speeding up the process is to be an expert at budgeting. Make a budget and stick to it every month, while learning to save money in new ways. For example, if you spend a lot on food, try shopping at a different grocery store or limiting yourself to one restaurant meal per month. Or if you spend a lot on clothes, vow to stay away from clothing stores until you’re debt free. Whatever it takes, try to cut your monthly expenses.

These small choices will make a big difference in your debt repayment!

Another idea is to earn some extra income on the side, in addition to your main job. There are freelancing websites online now that allow anyone to apply for freelance jobs and you can spend a few hours a week doing things like typing, organizing, designing, writing, etc. and make some extra money to pay off debt faster.

Jennifer said that a key to paying off $37,000 of debt was making some major money-saving decisions. After thinking about ways to cut her expenses, she realized “If I got rid of this car it would help me pay off my debt a lot faster,” she said. So that’s what she did. She sold her car, and it sped up her progress.

4. Cultivate Your Motivation for Paying Off Credit Card Debt

How do you stay motivated? How do you keep plugging along week after week, month after month, even when it’s hard? We’ve found that the key is to keep your long-term goals in mind and to share your progress with friends and loved ones. You can write down your goal and even add a picture of something that motivates you — whether it’s a new house, a vacation, your retirement — and put it where you will see it every day. This will help you stick with it until you reach your goal!

And if you tell friends and family about your goal, they will almost always help you stay focused too!

Jennifer used both of these tactics. She got support from those around her, and she kept her goal at the forefront. “What I really wanted was freedom — to travel and to be able to grow my business in the way I want to,” she told us. We’re so glad she reached her goal, and we hope that these tips will help you reach your goals, too!
SOURCE: Benjamin Feldman, Yahoo! Finance

Tips to Reduce Your Monthly Bills

Here's a nice little checklist on how to lower your monthly bills.

Learn your options for student loan debt repayment. That decision you made long ago (or the one you’re making now) to borrow all that money for your education was supposed to be an investment — not a burden. So it’s important to find a repayment plan that isn’t counterproductive to your greater goals. Considering there are about 37 million student loan borrowers with outstanding loans today, according to late 2011 statistics from the Federal Reserve Board of New York, many student loan providers are offering a variety of lower-cost ways to repay these debts.

First, check to see what type of auto-pay benefits your provider offers. Great Lakes, for example, may reduce your interest rate if you put your monthly payment on auto-pay. Next, find out if student loan consolidation makes sense for you. Depending on the current annual percentage rate, the number of years you have to repay, and the principal balance of each loan, you could end up lowering your interest rate by consolidating.

Look for promotional packages. Cable, wireless and other utility providers often advertise new promotional deals that will lower your monthly bill payment if you switch to that provider. And because you’re a new customer, the services offered are usually premium packages. DIRECTV’s Triple Savings Event, for example, allows customers to lock in three years of savings: You can save $33 a month in your first year as a customer, $10 a month in your second year, and $10 a month in your third year.

Search for hidden fees. When you’re opening a new bank account or credit card, read the fine print, or you may end up paying money for simply not following instructions. Some bank providers, for instance, require that you maintain a certain checking account balance each month. If you go below that number, then you could be hit with a hefty charge. Also, when opening a credit card, look for options that come without an annual fee — there are plenty to choose from, so there’s no sense in paying extra money just to have the card.

Plan meals weekly. “You may love to cook but trying to figure out how to feed your family a healthy, budget-friendly meal that they’ll actually want to eat can sometimes take the fun out of it all, especially with a busy work schedule,” said Linda Descano of Citi’s Women & Co. The key, she says, is to start by making a weekly menu, not just a shopping list. Once you’re in the store, save money by only shopping for what’s on your list, and be careful not to stray. You’d be surprised how much money you can waste when you spontaneously spend in a grocery store.

Also, Descano suggests having a plan B. You don’t always know when you’re going to have to stay late at the office, or when your kid’s soccer game is going to run over. Make sure your pantry is stocked with healthy non-perishables, such as tuna, beans and pasta, so that it’s easy to throw something together at the last minute. Finally, utilize your grocery store and credit card rewards programs. The Citi ThankYou Premier card, for example, can help you earn extra points on supermarket purchases.

SOURCE: Sarah Kaufman, Yahoo! Finance